NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Geographical and Sectoral Shocks in the U.S. Business Cycle

Atish R. Ghosh, Holger C. Wolf

NBER Working Paper No. 6180
Issued in September 1997
NBER Program(s):   IFM

We examine whether the aggregate U.S. business cycle is driven mainly by geographical" shocks (affecting all sectors within a state), or by sectoral shocks (affecting the same sector in all" states). We find that, at the level of an individual sector in an individual state growth are driven by the sector, not by the state: textiles in Texas moves more with textiles" elsewhere in the U.S. than with other sectors in Texas. But shocks to sector growth rates exhibit" a lower correlation across sectors compared to the correlation of shocks to state growth rates" across states. As a result, geographical shocks gain greater importance at higher levels of" aggregation. Finally, we find that changes in the volatility of the aggregate U.S. business cycle" reflect, to a roughly comparable degree, both changes in the volatility of state and sector business" cycles, and changes in their correlation across sectors and states.

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Document Object Identifier (DOI): 10.3386/w6180

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